While most biofuels produce less carbon emissions than petrol or diesel, carbon savings vary greatly with the energy used to produce them. Deforestation to make space for growing biofuels in developing countries is another concern with imported biofuels. Now with a strong biofuels push both on the UK and European levels the sustainability question is becoming more urgent.

The UK's Renewable Transport Fuels Obligation sets a 2010 target for biofuels to provide 5% of the country's transport fuel. Meanwhile the EU has committed to sourcing 10% of its transport fuels from wheat, sunflower oil and other plant material as part of its Energy Policy for Europe policy package.

Responding to questions over the environmental beneifts Britian's biofuels policy Stephen Ladyman said Britain can't afford to wait for sustainability guidelines to be developed and must act now to promote biofuels.

"I don't believe we should sit back and do nothing for the next few years while we argue over whether a particular biofuel delivers a 30% or a 40% carbon saving compared to an equivalent fossil fuel.

"If we don't act, the alternative is that we keep burning fossil fuels," he said, speaking at the Making Transport Fuels Sustainable conference in London on Wednesday.

Britain is working with the EU to develop a mandatory reporting scheme that will "offer a real incentive" to companies to use biofuels with the best environmental performance, he said. Such a scheme would give customers access to information about where the bio-fuel they are buying is sourced and its environmental impact.

This information should encourage the use of sustainable biofuels and avoid unsustainable ones, biodiesel produced from palm oil grown in South East Asia where vast swathes of land are deforested to provide land for the plantations, causing biodiversity loss as well as cancelling out carbon savings.

"Encouragement" through tax exemptions and other benefits is also likely to be the route taken by the EU in their sustainable biofuel policy.

World Trade Organisation rules mean that import bans are a no-go zone, Alexandra Langenheld, an EU expert on biofuels, told the conference.

"We need to prevent biodiversity loss on a large scale, deforestation and high greenhouse gas production methods," she said. The EU is looking for a "statutory system with minimum standards that is also WTO-compatible."

With "second generation" biofuels, which make much more efficient use of plant material and produce high carbon savings, the EU could fulfil all of the 10% target using domestically grown biofuel, she said. The 18m hectares of land needed would come from set-aside, fields formerly used to grow cereal for export and land that has fallen out of agricultural use.

Sourcing all of Europe's biofuels domestically would clearly get around the problem of biofuel production causing deforestation in Malaysia or India.

But with second generation biofuels still in the development phase, this prospect cannot be relied on for now.